claiming that IT administrators could save large amounts by taking another look at their licensing deals with Microsoft over software.

"Making the wrong choice can cost you thousands of dollars, or worse, expose you to legal risk because of non-compliance," said Rob Horwitz, chief executive of Directions on Microsoft. "There are ways to save money if you know where to look."

A key problem is that the licensing system is self-policing, yet the penalties for not buying the correct licences are severe, and board members are liable. As a result companies often overbuy on licences to play safe.

Part of the issue is the sheer size of the product offering from Microsoft. With a finger in so many pies the licensing schemes are liable to see companies either buying the wrong licences or signing up to all-you-can-eat enterprise agreements.

The report said that licensing terms are highly complex and are likely to remain that way since to simplify the existing system would mean Microsoft losing cash in the short term and facing a complex task in changing the current system.